We can get ride of the Umeme nightmare in 2025. Why the Government of Uganda should not renew the Umeme concession
For two decades we have suffered under the incompetence and ineffeciency of Umeme. The only positive outcome that I can possibly attribute to Uweme is digital electricity meters. These meters saved us from the inaccurate and often prone to manipulation analogy meters. However, I am not even sure whether it was their initiative or not. One day some government bureaucrats of indeterminate intelligence who were potentially corrupted decided that Uganda should sell its electricity to a distributor in the name of Umeme. So they granted Umeme the Monopoly to distribute electricity in most urban centres and earn hefty profits in the process. It is entirely possible that this arrangement was a corrupt compromise whereby crooks in government earned hefty kickbacks and bribes in exchange for such a bad bargain. The end result is that we sold our electricity, in which we invested trillions of shillings to develop generation infrastructure (dams) to an intermediary who earns billions of shillings of profit from our electricity while paying peanuts to us for it.
As a result of the corruption and lack of foresight by our leaders for two decades Umeme has profited from our electricity without investing in the electricity distribution network or paying market values for our electricity. Luckily for us, the corrupt bargain between Umeme and Uganda will expire in 2025. After two decades of being robbed, we have a chance to reclaim our electricity, distribute it ourselves and reap the billions in profits that Umeme was milking from us. In 2025 or sooner, you will witness corrupt public officers and politicians line up to lobby for the renewal of the shameful Umeme concession. They will throw around fictional statistics of the amount of money that Umeme has invested in Uganda in the two decades. They will tell you about the fairy tales of the improvements and innovations that Umeme has introduced and implemented in the last two decades. They will lie through their teeth about the improvements in service delivery that have occurred under the stewardship of Umeme. They will take credit for the reduction in load shedding and the increase in the number on of households connected to the electricity grid. The politicians and crooks will forget to tell you how tax payers invested trillions to construct electricity generation systems and distribution networks. They will forget to tell you that tax payers pay Umeme for every household connected to the electricity network only for Umeme to benefit by profiting from the tariffs paid by the new customers.
For the reasons above and many more that do not need explanation, we need to reclaim our electricity and our continued investments in electricity generation and distribution so as to maximize their value and potential. We need to start profiting from our huge investments and use the resultant profits to pay back the huge debt we incurred to build dams and electricity distribution networks. We need to oppose and prevent the renewal of the Umeme Concession in 2025. As seen above, there are very strong reasons to justify the none renewal of the Umeme concession, but to strengthen our case for not renewing the Concession we explain our stand further.
- Recently, Parliament passed the Electricity Amendment Bill, 2022, which among others, permits generation and transmission licensees to supply electricity in bulk directly to categories of customers specified by the minister. This law potentially breaks the Monopoly previously enjoyed by Umeme in distributing electricity in major urban centres. It allows government to license other distributors and potentially allows it to sideline Umeme and distribute electricity directly to factories and other industries. The law passed Parliament due to President Tibihaburwa’s alleged distain for Umeme and it’s inflation of electricity prices to pat its bottom line.
- Like we warned earlier, government agencies will sell to Ugandans the fairytale of accomplishments attained by Umeme in the last two decades. As expected, according to UEDCL, overall, since 2005 when the GoU entered into the LAA with Umeme, electricity consumers have grown from 263,000 to 1.5 Million as at the end of 2019. This seems impressive but firstly, Uganda is a country of forty million souls and close to ten million households therefore the statistic is not that impressive. Secondly, Umeme charges a market rate for every customer funded connection to the electricity grid. Actually the connection fees charged by Umeme are sometimes higher than the market price. Thirdly, Umeme is paid labour costs for every government funded customer connection to the electricity grid. Fourthly, more than eighty percent of the customer connections to the electricity grid are tax payer funded. Consequently, it’s deceptive to attribute the increase in customer connections to Umeme. They should be attributed to tax payers who funded increased electricity distribution networks and who subsidise customer connections. It has nothing to do with the Umeme Concession.
- In January 2022, Parliament rejected the ill advised and potentially criminally negligent plan to pay Ushs 256 billion to buy out the three years remaining on the Umeme Concession that is set to expire in 2025. The deal would have given Umeme a windfall of USD 215 million for the remaining three years of its concession. This money arises from the claim by Umeme that in the last two decades it has invested USD 547 million (as of December 2021) and recovered USD 331 million with USD 215 million outstanding. I don’t know how the Umeme Concession is structured but to me it seems silly and stupid to compensate an agent who has failed to use delegated duties to recover their investment. In any case who has verified these alleged investments and where were they made given that electricity distribution networks and customer connections are funds by the tax payers. If the money was invested in line maintainance, as a business whose earnings depends on the electricity distribution lines, it is inherently your responsibility to ensure that the electricity lines are in functional state. Otherwise it’s game over because your most critical assets stops being productive.
- If you critically think about it, Umeme is the cause of the high tariffs that Ugandans must endure. If you didn’t know, you will be surprised to learn that in Uganda, electricity is produced at a weighted cost of Ushs 250 per unit but sold at Ushs 750 per unit due to the Umeme Concession and it’s inefficiencies. If the tax payer is paying for customer connections and bearing the cost of funding distribution networks, why is the price of electricity so high. First and foremost, Umeme must make a hefty profit and therefore, a decent profit margin must be factored into the tariff. Secondly because Umeme is unable to ensure low theft of electricity by unscrupulous customers and defaulting government agencies, a provision for power losses must be included in the tariff. Thirdly, because of corruption, the cost of bribes and kickbacks must also be factored into the tariff. The end result is a tariff that is more than three times the weighted cost of producing the electricity and Ugandans therefore must suffer under the heavy burden of exorbitant electricity prices.
- As a result of the high and exorbitant electricity tariffs, President Kaguta Yoweri Museveni Tibihaburwa is not a fan of the Umeme Concession. People close to him claim that he opposes the renewal of the Umeme Concession because it has led to high electricity prices. According to him high electricity prices have undermined government efforts to industrialize the nation. As a result of this support for low electricity prices to support industrialization in Uganda, the Electricity Amendment Bill, 2022 has passed Parliament and could undermine the renewal of the Umeme Concession come 2025.
- Due to the high investment in electricity generation and distribution that tax payers have made, as Ugandans we have a right to profit from our costly investment. Firstly, we can distribute the electricity ourselves and earn the hefty profits and other money extracted by Umeme from electricity distribution. Obviously, you are not naive enough to believe that the profits that are publicly declared by Umeme are the only money Umeme milks from electricity distribution. You will be surprised to find out that it is possible that umeme, its owners and benefactors in government milk and launder twice more money than profits they declare. Secondly we can use electricity distribution as a vehicle for job creation by liberalizing trade in connection materials and the connection of customers to the electricity grid. Furthermore, we can locally manufacture and use some of the connection materials needed for electricity distribution and line maintainance. Thirdly we can reduce the electricity tariff to an affordable but profitable amount and use the profits to repay the loans acquired to develop electricity distribution and generation networks. We can make the tariff progressive such that high earners subsidize low income households. We can also reduce power loss in order to make the tariff more affordable.
If we take action, we can prevent the renewal of the Umeme Concession and in the process take back our electricity and use it to benefit ourselves. Be part of this movement by sharing your support for the none renewal of the Umeme Concession.
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